When less isn’t more

The consulation paper on reforming the Construction Act has been published. But let’s look at what we’re not being consulted about.

For a start, there’s no sign of a single procedure for adjudications. It would certainly make life much simpler for adjudicators and parties. But, on the other hand, one size does not always fit all, and by and large everyone has coped so far with the different rules.

There are differences on adjudicators giving the reasons for their decisions. The Construction Act contains nothing about this issue. The Scheme for Construction Contracts says the adjudicator should give reasons if asked to do so. Some adjudication procedures say he should not give reasons unless asked to do so, or not all. In other words, no change here.

At the moment, there is no express “slip rule” allowing an adjudicator to correct minor errors after a decision. But we know from court decisions that an adjudicator can correct an error, so there is no need to make an express provision for this.

The Scheme contains a couple of paragraphs about enforcement, which seemed to have wandered across from the Arbitration Act. They caused lots of confusion at first, but now everyone knows that you can enforce in court. The paragraphs are not going to be amended, but nobody takes any notice of them anyway.

It has been suggested that the act and Scheme should be changed to clarify the law in the light of court decisions. These involve claiming damages for breach of contract, the power of the adjudicator to rule on timing of referral notices, interest and multiple disputes. These are fully covered by court decisions, and anyone who does not know the position can find out quite easily. Again, there is no need to legislate.

So far, so good. But the next set of points relate to payment periods and insolvency – two topics that are of interest to everyone.

Everybody may know that there is a contract, but if one is not evidenced in writing, no adjudication

Some have suggested that there should be a maximum permissible payment period, so that unscrupulous parties cannot get away with small print giving them six months to pay. The paper’s rather illogical comment is that construction should not be treated as a special case: as nobody else gets protection of that sort, construction shouldn’t have it either. This is illogical as nobody else has anything like the Construction Act, and so the industry is already a special case. However, the decision is probably right. There do not seem to be serious abuses of this sort. The problem is not the credit period, but failure to pay within that period, which is covered by interest.

Construction and insolvency go together well and contractor insolvencies are not unusual. To keep subcontractors on site, the employer offers to pay them direct instead of pouring money into the bottomless pit of the insolvent contractor. As the law stands, it will have to pay twice, because the liquidator of the contractor will still be able to collect. It has been suggested that something should be done, but that would not be fair on other creditors. So no changes there.

Finally, the biggest disappointment of all. Before any of the Construction Act applies, the contract must be in writing or evidenced in writing. When the act first came in, most people thought that “evidenced in writing” meant there had to be some evidence in writing of a contract. A note in a diary that Fred had agreed to do the job next Tuesday would be good enough. Adjudicators did not seem to have too much trouble deciding what the relevant terms were, and got on with the job. But the Court of Appeal stopped all that by deciding that all the terms of the contract had to be evidenced in writing before the act could apply. That led to absurd arguments on whether an adjudicator has jurisdiction. Everybody may know that there is a contract but, if one of the terms is not recorded in writing, no adjudication.

As adjudication cases are unlikely ever to reach the House of Lords, we are stuck with this mess. Reform of the act offered an opportunity to put it right. It would have been simple to make the act apply to all contracts, in writing or not. That opportunity is not going to be taken.

John Redmond is head of construction at solicitor Osborne Clarke in Bristol